Debt Consolidation
Debt consolidation replaces several balances with one loan, ideally at a rate below your balance-weighted average APR. It wins when the new rate and fee beat the current path and the old accounts stay at zero afterward.
Consolidation is refinancing for consumer debt: a personal loan (or balance-transfer card, or sometimes a HELOC) pays off the scattered balances, leaving one fixed payment and one rate. The math test is simple: compare the loan’s APR and origination fee against the blended APR you pay today, weighted by balance. Card debt blending above 20 percent against a good-credit loan in the low teens clears that bar with room; a loan within a point or two of your blend usually does not once the fee counts.
The behavioral test is the one that decides outcomes. Consolidation only refinances the past; if the emptied cards refill, you carry the loan plus new balances, the double-debt trap. The debt consolidation calculator runs the numbers against your actual debts, and the snowball vs avalanche calculator shows the no-loan alternative.
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Related terms: Annual Percentage Rate (APR) , Origination Fee , Debt Avalanche , Minimum Payment
Last updated . Part of the FinExplained finance glossary .